PWBA
Office of Regulations and Interpretations

This responds to your request for an advisory opinion on behalf of Sisters
of Charity of the Incarnate Word, Houston, Texas ("SCH"). You ask
whether certain employee benefit plans ("Plans") sponsored by SCH are
church plans within the meaning of section 3(33) of Title I of the Employee
Retirement Income Security Act of 1974 (ERISA).

Your correspondence and the accompanying documents contain the following
facts and representations. SCH was established by the Congregation of the
Sisters of Charity of the Incarnate Word ("Congregation") to
implement the Congregation's health care mission. The Congregation is a
religious congregation of women ("Sisters") founded in 1866 to
provide a health care ministry. It has been approved as a congregation of the
Roman Catholic Church ("Church") and is devoted to the Church's
religious, charitable and education ministries. Each member of the Congregation
takes vows of obedience, chastity, and poverty.

The Congregation is under the direct control and spiritual guidance of the
head of the Church. The Congregation is governed by a Rule and a Constitution
that may be changed only with the approval of the Church, and is subject in its
operations to the Code of Canon Law, as promulgated by the head of the Church.
Any substantial property of the Congregation may not be disposed of without the
approval of the head of the Church. The Congregation's leadership is comprised
of the General Superior and the General Council of the Congregation as they are
chosen from among the Congregation's membership from time to time by the
Congregation.

The Congregation conducts its civil business affairs through the
Congregation of the Sisters of Charity of the Incarnate Word, Houston, Texas
("CSC"), which is organized as a Texas nonprofit corporation with no
members. The board of directors of CSC is comprised of the General Superior and
the General Council of the Congregation.

SCH is organized as a nonprofit membership corporation under the laws of
Texas. The members, who appoint the board of directors, are the General
Superior and the General Council of the Congregation. The Articles of
Incorporation of SCH state that SCH is organized exclusively for religious,
charitable and educational purposes that are to be carried out in the context
of the theology, philosophy and other teachings and norms of the Church.

SCH's health care mission in the United States is carried out through 21
health care centers ("Health Care Centers") and several associated
organizations located in Texas, Louisiana, Arkansas, California, and Utah.
Twelve of the Health Care Centers are divisions of SCH, which you identify as
follows:

All of the associated organizations whose employees are covered by the Plans
("Associated Organizations") are integral parts of SCH and provide
essential aspects of SCH's health care services, including, for example, a
pharmacy, a recovery association, clinics, and claims administration. With one
exception, the Associated Organizations are divisions or operations within SCH
that do business under particular names. The exception is C.H. Wilkinson
Physician Network ("Wilkinson"), which is separately incorporated.
Wilkinson is a nonprofit corporation of which SCH is the sole corporate member.
It was formed to provide the services of certain physicians within the SCH
health system and currently employs 36 people. Under its bylaws, Wilkinson is
charged with conducting its affairs according to the official teachings of the
Church and the ethical and religious directives for Church health facilities
promulgated by leaders of the Church in the United States.

The Congregation, CSC, SCH, and the Health Care Centers are organizations
described in section 501(c)(3) of the Internal Revenue Code ("Code")
and are exempt from federal income tax. All of these organizations, except
Dubuis and Wilkinson, are listed in the Official Catholic Directory
("Directory"), the official directory of the Church, as being
agencies of the Church.1 Dubuis and Wilkinson have
independently obtained letters from the Internal Revenue Service stating that
they are exempt from tax under section 501(a) of the Code as an organization
described in section 501(c)(3) of the Code.

Under SCH's Articles of Incorporation, SCH and the Health Care Centers are
and always will be instrumentalities of the Church. They are to be managed and
directed according to the doctrines, disciplines, laws, rules and regulations
of the Church, the constitutions, directives, resolutions and decrees of the
Congregation, and the ethical and religious directives for Church health
facilities promulgated by leaders of the Church in the United States. The
articles of incorporation or the bylaws for CSC and each of the Health Care
Centers contain similar provisions.

SCH and CSC have established and maintain the Plans for the benefit of the
Sisters and the employees of the Congregation, SCH, the Health Care Centers,
and the Associated Organizations. Specifically, you identify the Plans that are
the subject of your request for a "church plan" opinion as follows:

You represent that Plans A through I and X are employee pension benefit
plans and Plans J through W are employee welfare benefit plans as those terms
are defined in sections 3(2)(A) and 3(1) of ERISA, respectively. The Internal
Revenue Service has determined that Plan A is a qualified plan within the
meaning of section 401(a) of the Code. No election under section 410(d) of the
Code has been made with respect to Plan A or any of the other pension plans
identified above.2

The Plans are administered by two committees ("Committees" or
individually "Committee") created by the SCH bylaws
("Bylaws"). The Employee Benefit and Retirement Committee is
responsible for administering plans offered to employees without regard to
compensation levels, including the Plans identified above at A,E,I through R,
and X. The Executive Compensation Committee is responsible for administering
executive compensation, including deferred compensation and benefits, and
administers the Plans identified at B,C,D,F,G,H, and S through W. You state
that each Committee is established in the Bylaws for the purpose of
administering the plans under its charge and that a principal function of each
Committee is to serve as the plan administrator for those plans.3 The membership of both Committees is identical and
consists of five individuals who are appointed by and serve at the pleasure of
SCH's board of directors. The board of directors has the responsibility to
oversee and supervise the Committees and must approve the Committees' major
actions that exceed the authority delegated to them. The Committees may
delegate their authority to agents who report to the Committees on actions
taken and who may not make any modifications to the Plans that change the
benefits philosophy.

To further document your request, you submitted a private letter ruling in
which the Internal Revenue Service concluded that the Plans identified above at
A and J through R are church plans within the meaning of section 414(e) of the
Code.

Your request for an advisory opinion regarding "church plan"
status involves application of the provisions of sections 4(b)(2) and 3(33) of
Title I of ERISA to the facts presented. Section 4(b)(2) of ERISA excludes from
coverage under Title I of ERISA any plan that is a church plan as defined in
section 3(33) of ERISA. The term "church plan" is defined in section
3(33) of ERISA, in pertinent part, as:

a plan established and maintained (to the extent required in
clause (ii) of subparagraph (B)) for its employees (or their beneficiaries) by
a church or by a convention or association of churches which is exempt from tax
under section 501 of the Internal Revenue Code of 1986 . . . .

(C) For purposes of this paragraph --

(i) A plan established and maintained for its employees (or
their beneficiaries) by a church or by a convention or association of churches
includes a plan maintained by an organization, whether a civil law corporation
or otherwise, the principal purpose or function of which is the administration
or funding of a plan or program for the provision of retirement benefits or
welfare benefits, or both, for the employees of a church or a convention or
association of churches, if such organization is controlled by or associated
with a church or a convention or association of churches.
(ii) The term employee of a church or a convention or association of churches
includes . . .
(II) an employee of an organization, whether a civil law corporation or
otherwise, which is exempt from tax under section 501 of the Internal Revenue
Code of 1986 and which is controlled by or associated with a church or a
convention or association of churches; . . .
(iii) A church or a convention or association of churches which is exempt from
tax under section 501 of the Internal Revenue Code of 1986 shall be deemed the
employer of any individual included as an employee under clause (ii).
(iv) An organization, whether a civil law corporation or otherwise, is
associated with a church or a convention or association of churches if it
shares common religious bonds and convictions with that church or convention or
association of churches . . . .

It appears that the Congregation is an integral part of the Church by virtue
of its religious and health care ministries. Furthermore, the Congregation is
exempt from tax pursuant to section 501(c)(3) of the Code, is clearly
controlled by the Church, and is "associated with" the Church within
the meaning of section 3(33)(C)(iv) of Title I of ERISA because the
Congregation shares common religious bonds and convictions with the Church.

Through the Congregation the Church controls CSC, SCH, the Health Care
Centers, and the Associated Organizations. First, the Church controls CSC and
SCH through the Congregation because the members of the Congregation's
governing body (i.e., the General Superior and the General Council) serve as
the board of directors of CSC and as the corporate members of SCH with powers
to appoint SCH's board of directors. Second, the Church through the
Congregation and SCH controls the Health Care Centers and the Associated
Organizations because they are integral divisions or parts of SCH or nonprofit
corporations of which SCH is the sole corporate member.

In addition, CSC, SCH, the Health Care Centers, and the Associated
Organizations are "associated with" the Church, within the meaning of
section 3(33)(C)(iv), because of factors that assure that they adhere to the
tenets and teachings of the Church and thus evidence that they share common
religious bonds and convictions with the Church. Those factors include Church
control of CSC and SCH through the Congregation and Church control of the
Health Care Centers and the Associated Organizations through the Congregation
and SCH, as discussed above; Directory listings applicable to CSC, SCH, and
specific Health Care Centers; participation by members of the Congregation, who
serve as its General Superior and General Council, on the board of directors of
CSC, as the corporate members of SCH, and through SCH in the corporate
membership of those Health Care Centers that are incorporated and of Wilkinson.
Also, CSC, SCH, the Health Care Centers, and the Associated Organizations are
exempt from tax in accordance with section 501(c)(3) of the Code.

Accordingly, the Department of Labor (the Department) concludes that
individuals whose employment is with CSC, SCH, the Health Care Centers, or the
Associated Organizations are employees of organizations that are civil law
corporations exempt from tax pursuant to section 501(c)(3) of the Code and that
are controlled by, or associated with, the Church within the meaning of section
3(33)(C)(ii)(II) of Title I of ERISA. In accordance with section 3(33)(C)(iii)
of Title I of ERISA, the Church is deemed the employer of these individuals for
purposes of the church plan definition in section 3(33); and the Church, as
employer, is deemed to have established and to maintain the Plans.

In addition to the above reasons for concluding that the Plans meet the
church plan definition in section 3(33), the Plans may be considered church
plans by operation of section 3(33)(C)(i) of Title I of ERISA because the
Committees' administration of the Plans further assures that the Church is
deemed to maintain the Plans. Section 3(33)(C)(i) applies to the Plans because
a principal purpose or function of each of the Committees is administration of
one or more of the Plans for the provision of employee retirement or welfare
benefits and because the Committees are controlled by and "associated
with" the Church within the meaning of section 3(33)(C)(iv) of Title I of
ERISA. It appears that the Committees are controlled by the Church through the
Congregation and SCH's board of directors, which appoints the members of both
Committees and may remove them at will. Furthermore, the Church's control of
the Committees through the Congregation and the SCH board of directors assures
the Committees' adherence to the tenets and teachings of the Church and thus
evidences that the Committees share common religious bonds and convictions with
the Church. Consequently, the Committees are "associated with" the
Church within the meaning of section 3(33)(C)(iv).

For the above reasons and based on your representations, it is the opinion
of the Department that the Plans constitute church plans within the meaning of
section 3(33)(A) of Title I of ERISA by operation of sections 3(33)(C)(iii) and
3(33)(C)(i) of Title I of ERISA. Because church plans described in section
3(33) of Title I of ERISA are excluded from the requirements of Title I of
ERISA pursuant to section 4(b)(2) thereof, the Plans are not required to comply
with the provisions of Title I of ERISA as administered by the Department.

This letter constitutes an advisory opinion under ERISA Procedure 76-1 and,
accordingly, is issued subject to the provisions of that procedure, including
section 10 thereof relating to the effect of advisory opinions. This letter
relates solely to application of the provisions of Title I of ERISA and,
therefore, is not determinative of any particular tax treatment under the Code.

1It is the Department of Labor's understanding
that the Internal Revenue Service has determined that any organization listed
or appearing in the Directory is an organization described in section 501(c)(3)
of the Code and exempt from tax under section 501(a) of the Code.

2Section 4(b)(2) of ERISA excludes from Title I
coverage church plans as defined in section 3(33) of ERISA, except those plans
providing retirement benefits that have made the Code section 410(d) election.

3Section 6.2.5 of the Bylaws, however, states
that the responsibilities of the Executive Compensation Committee include
"tak[ing] action with respect to position evaluation, salary structure and
adjustment, . . . and performance appraisal and review for executive management
personnel within the SCH Health Care System." Based on your
representations, we assume for purposes of this letter that a principal purpose
of the Committee is to administer the Plans for which it has responsibility.